The financial-services industry continues to make large investments in programs to combat credit fraud in order to reduce transaction risks, especially in the consumer market. For example, several industry players have started to integrate “smart chip” technology into payment cards, often referred to as “smart cards”. A smart chip is a microprocessor embedded in the payment card. The chip is able to store a small amount of information and to control the conditions under which the information can be accessed or modified.
The primary purpose of the chip is to authenticate the identity of the cardholder before permitting charges on the payment card. Authentication of cardholder identity is typically performed by swiping the smart card at a merchant's card reader, and using a challenge-PIN pair to confirm cardholder identity. Example “Smart Chip” programs include American Express®' “Blue”, MasterCard's OneSMART and Visa's “EMV” cards.
Although the smart card solution inhibits use of the card by unauthorized users, it does little to maintain the privacy of cardholder information. Cardholder information, including the account numbers, expiration date and identity of the cardholder, is generally collected at a merchant's card reader during cardholder authentication. The information may subsequently be used in manners which are undesirable to the cardholder, such as to track cardholder purchases for directed advertising, or even worse, for identity theft. In these days of continually-increasing concern over identity theft, consumers are growing less comfortable with personal identification information being shared in electronic transactions.
The growth of wireless products has increased the types of payment options available to a consumer beyond smart cards. For example a “digital wallet” provides functionality for mobile payments (this specific application also being known as “proximity payments”), for either credit or debit purchases. With the digital wallet, the subscriber's cellular handset, handheld device or other token, includes a specialized chipset; when the cellular handset is passed over the merchant's reader, the consumer's charge information is collected by the merchant's reader. A code representing the subscriber's identity is transmitted from handset to merchant's receiver (typically using Bluetooth or other near-field radio technology).
With digital wallets, the subscriber's identity (or token representing the subscriber's identity) that is stored in the handset is passed as needed to the merchant—and by extension to anyone with access to the merchant's back-office infrastructure—for each merchant with whom the subscriber transacts business. Similar to smart cards, digital wallet users thus run the risk of identity theft. Identity theft may also result if the handset is stolen; theft of the handset, especially if the theft remains undetected, is a theft of the subscriber's identity token, which may be used to exploit other financial vulnerabilities of the subscriber.
Another disadvantage of digital wallets is that, because the subscriber's identity is stored in the handset, a loss or theft of the handset is a loss of the subscriber's the ability to pay. The loss of a debit—based digital wallet results in the loss of the cash balance remaining in the handset.
Another problem associated with current digital wallets is that it is difficult to move a subscriber's payment capacity between devices. Devices are often limited in the variety of access technologies they are capable of supporting, so merchants or consumers may require numerous different devices to support different types of access technologies. In addition, the current implementation of digital wallets makes it difficult to integrate a flexible and changeable challenge-response mechanism, thereby placing any value associated with the digital wallet at risk.
It would be desirable to identify a method and apparatus which would increase the protection afforded to consumer information to reduce the risk of identify theft. In addition, it would be desirable to increase the protection afforded to consumer resources and the variety of payment options available to the consumer while decoupling of payment capability from a specific device, token, or card.